21 Questions (Series) – 2. Does anybody else ever pay you to advise me and, if so, do you earn more to recommend certain products or services?

21 Questions to Ask Your Financial Advisor

 

2. Does anybody else ever pay you to advise me and, if so, do you earn more to recommend certain products or services?

Jason wants a “No” here.

No, at MARGIN we do not make more money when we select certain products or services over others.

The SEC has mentioned (see last link) that many financial firms fail to disclose that if you buy their own products, or other services, they make more money, and their representatives do too through bonuses, commissions, or other incentive structures.

Proprietary products are investment vehicles that are manufactured and distributed by the same company. For example, a Southwestern Mutual financial advisor sells Southwestern Mutual financial products. Now this many not be an issue on the surface, but a lot of times the product company incentivizes their advisors through high commissions to sell their own products which may not be best for you. This also happens on platforms where funds pay revenue sharing or listing prices to be included.

It’s not just large insurance companies that do this with their own annuities, and life insurance, but banks and larger low-cost brokers who sell certain products in an attempt to maximize their own profits.

It’s best to avoid working with anyone who has an incentive to earn a greater check recommending  one service or investment product over another.

Does your financial advisor’s business card have the same logo as your investment, or insurance product?

Does your financial advice include investments on “the list” a company is recommending?

Blog links:

(1) https://www.sec.gov/news/pressrelease/2015-283.html

(2) https://www.wsj.com/articles/fidelity-is-rethinking-how-it-charges-you-for-financial-advice-152343900

(3) https://www.wsj.com/articles/advisers-at-leading-discount-brokers-win-bonuses-to-push-higher-priced-products-1515604130?ns=prod/accounts-wsj

(4) https://www.vedderprice.com/highlights-from-sec-speaks-2018